New CEOs pursue their own self-interests by sacrificing stakeholder value

    Authors

    J. S. Harrison;J. O. Fiet

    Comments

    Authors: contact us about adding a copy of your work at STARS@ucf.edu

    Abbreviated Journal Title

    J. Bus. Ethics

    Keywords

    chief executive officer; executive succession; pension funding; research; and development; self-interested behavior; stakeholders; EXECUTIVE SUCCESSION; PERFORMANCE; MANAGEMENT; OWNERSHIP; FIRM; Business; Ethics

    Abstract

    Short-term performance increases that are sometimes observed after CEO successions may be evidence of self-interested behavior. New CEOs may cut allocations to long-term investment areas such as research and development (R&D), capital equipment and pension funds in an effort to drive up short-term profits and secure their positions. However, such actions have unfavorable consequences for some stakeholders. This study provides evidence that both R&D and pension funding are reduced subsequent to a succession, even after accounting for industry trends. The expected short-term profitability increases are also observed. A major implication of these results is that boards of directors and other interested parties should carefully monitor the actions of new CEOs with regard to their treatment of R&D and pension funding if they would like to prevent such actions from occurring. This study also highlights the need to investigate other potential self-interested behaviors of new CEOs.

    Journal Title

    Journal of Business Ethics

    Volume

    19

    Issue/Number

    3

    Publication Date

    1-1-1999

    Document Type

    Article

    Language

    English

    First Page

    301

    Last Page

    308

    WOS Identifier

    WOS:000079724300006

    ISSN

    0167-4544

    Share

    COinS